Chapter 8. Office of the Director
Subchapter 2. Administration of Self-Insurance Plans
Article 13. Group Self Insurance

§15475. Board of Trustees.

(a) Each group self insurer shall have a Board of Trustees that is responsible for all operations of the group self insurer.

(b) Each trustee on the Board of Trustees shall be elected by the group members or, if each group member has a seat on the Board of Trustees, the trustee may be appointed by the group member. At least two-thirds of the trustees shall be employees or officers of the group members.

(c) The duties of the Board of Trustees shall include the responsibility to approve the request of any proposed member to join the group self insurer, subject to subsequent application and approval of the group member by the Director of Industrial Relations.

(d) The Board of Trustees shall take all necessary precautions to protect assets of the group self insurer, including all of the following:

(1) Designate a "Group Administrator" to administer the financial affairs and normal day-to-day operations of the group self insurer. The group administrator shall not be an owner, operator or employee of the third party administrator handling the claims of the group self insurer;

(2) Furnish a fidelity bond in an amount determined by the Board of Trustees to be an amount sufficient to assure the integrity of member or group funds handled by the Trustees, the Group Administrator, and employees of the group self insurer. Evidence of such bond shall be provided to the Manager upon request.

(3) Require the third party administrator handling the workers' compensation claims of the group self insurer to carry sufficient fidelity bond for the funds handled and errors and omissions coverage for the claims handled to protect the integrity of the group self insurer's funds;

(4) Restrict disbursements to the payment and expenses of handling claims, administrative expenses, posting of security deposit, and other expenses necessary for operating the group self insurer;

(5) Establish necessary bank accounts and accounting procedures for control of funds and accurate financial reporting;

(6) Audit the financial accounts and records of the group self insurer annually immediately after the December 31 close of the reporting year by an independent, certified public accountant;

(7) Hire an actuary to conduct an actuarial review of the group self insurer's claims to establish a level of cash needed to fund anticipated claims;

(8) Insure that all group members pay their share of group expenses, that none of the funds collected are extended as credit to any group member for the payment of premiums, and collect delinquent accounts from any group member;

(9) The Board of Trustees, the group administrator, or fiscal agent shall not utilize any of the funds collected from group members for any purpose not directly related to the payment of compensation liabilities of the group self insurer, posting of security deposit, payment of assessments and penalties as a group self insurer or the reasonable costs of operation of the group self insurer. Excess moneys not needed for current operation of the group self insurer shall be invested by the Board of Trustees, at its discretion, into California government bonds and notes, U.S. Treasury Notes and bonds, U.S. Government Agency issues, investment share accounts in savings and loans or credit unions whose deposits are insured by a federal agency, and savings accounts or certificates of deposit issued by a duly chartered commercial bank. Deposits in banks, savings and loans, or credit unions shall be limited to institutions in the State of California and shall not exceed the federally insured amount in any one account.

(e) The Board of Trustees may delegate specific functions to the group administrator of the group self insurer, including, but not limited to:

(1) contracting with the third party claims administrator for the handling of claims;

(2) determining the premium or other means of cost sharing to be charged each group member;

(3) investing surplus moneys subject to the restrictions of subsection (d) of this section and any others adopted by the Board of Trustees in addition to those contained in subsection (d);

(4) reviewing and accepting applications from prospective members to the group self insurer; and

(5) executing the Agreement of Assumption and Guarantee For Group Members or the Indemnity Agreement on behalf of the group self insurer.

All delegated functions shall be specifically defined in the group self insurer's by-laws.

NOTE: Authority cited: Sections 54, 55 and 3702.10, Labor Code. Reference: Sections 3700, 3700.1, 3701, 3701.5, 3702.1, 3702.2 and 3702.10, Labor Code.

HISTORY

1. New section filed 6-30-94; operative 6-30-94 (Register 94, No. 26).